Expensive brand 555 became aggressively more affordable due to tobacco industry price policy. Just between 2002 and 2010 the price of 555 cigarettes dropped more than 3 times compared to the price of rice. In comparison, the price of food items such as rice, eggs, pork, almost doubled during this period.

The nominal cigarette prices declined for the expensive 555 brand, and remained low and practically unchanged for common and cheap brands. Compared to per capita GDP, which grew at a faster rate, the expensive 555 brand became more and more affordable. In addition, the common and cheap cigarette brands (ARA and Cambo) became twice as affordable during this period. This shows how increasingly affordable it is to buy cigarettes in Cambodia

Increasing affordability of cigarettes based on relative income price (RIP)*, 2002-2010 *RIP = percentage of per capita GDP required to purchase 100 packs of cigarettes

Tax Impact Scenario

In the first of three scenarios, if excise tax is increased by 10% (i.e. excise tax becomes 11% of retail price) while the industry does not increase its price (i.e. it absorbs the incremental tax increase), the result would be a negligible reduction in industry revenue (-0.36%), and a barely perceptible increase in the retail price of cigarettes (0.61%) and government’s tobacco tax revenue (3.23%).

Impact of excise tax increase on revenues and consumption (without any increase in industry invoice price)

In the second scenario, if excise tax is increased by 100% (i.e. excise tax becomes 20% of retail price) and industry price remains unchanged, this will result in a still minimal decrease in tobacco industry revenue (-3.49%), and a correspondingly minimal increase in retail price (6%) and government tax revenue (31%) Neither of these scenarios has any significant impact on tobacco consumption (-0.36% and -3.5%, respectively) and smoking prevalence (-0.15% and -1.42%, respectively)

In the third scenario, if at the same time as the government’s increase of the excise tax by 100%, the tobacco industry was to increase its base price, the result would be a marginal (0.27%) increase in industry profit (i.e. no losses) and retail cigarette prices (16.71%, or in real terms only 217 riel). The total tobacco tax revenue, however, would increase from 31.35% to 36.5%, or an additional 4.9% total revenue compared to the earlier scenario. In addition, tobacco consumption would drop by 8.85% (a further 5% reduction compared to the first scenario) and the smoking prevalence would drop by 3.7%.

Impact of excise tax increase on revenues and consumption (when the industry increases its price)